Piccadilly Files for Chapter 11 Bankruptcy

AP

Thomas Sandeman, the company's CEO, told The Advocate that the filing, which was made Tuesday in U.S. Bankruptcy Court in Lafayette, will protect the value of Piccadilly, along with its employees and restaurants.

The bankruptcy filing said the chain wanted to protect itself from what it called "an aggressive legal maneuver" taken by lender Atalaya Capital Management.

This is Piccadilly's second bankruptcy filing; the first was in 2003.

In 2004, Los Angeles' Yucaipa Companies and Diversified Investment Management Group bought Piccadilly and took it private.

"The filing will help ensure a continuation of the Piccadilly brand, provide future employment to our employees and not disrupt service to our customers in any way," Sandeman said in a statement. "While we are disappointed in Atalaya's behavior at the bargaining table, we believe that the restructuring creates an opportunity for the company to build on its recent success."

Atalaya officials did not respond to emails and phone calls from The Advocate.

Piccadilly currently operates 81 restaurants, has 91 food service accounts and 3,464 full- and part-time employees. In its Chapter 11 filing, Piccadilly said it owes between $10 million and $50 million to its creditors.

Piccadilly said in its filing that the company has been hit hard by the recession, which has constrained restaurant spending, especially among the senior citizens who make up a large percentage of the chain's customers. Piccadilly said it responded to the challenges by revamping its menu, raising prices, reducing its staff, freezing salaries and subleasing unprofitable locations.

The company also disclosed it considered a merger with another national cafeteria chain, while it tried to negotiate a forbearance agreement with Wells Fargo Capital Finance.

Piccadilly had borrowed $6.9 million in revolving credit, $2.9 million on a letter of credit and $16 million on a term loan.

After Piccadilly failed to reach an agreement with Wells Fargo by an April 2 deadline, the lender sold the debt to Atalaya a week later.

Atalaya filed suit against Piccadilly on Sept. 5 in state court in Baton Rouge, seeking the $25.7 million it said Piccadilly owed in principal and interest, and asking for permission to seize restaurants in Baton Rouge and Jefferson. Atalaya also asked the court to appoint a keeper of Piccadilly's property.

Those actions put into motion a process that could lead to Piccadilly's closing, the company said in its bankruptcy filing, creating the prospect of rendering its assets "only fit for auction house fire sale."